Ireland has struck a long-awaited deal to ease the burden of the debts it took on to rescue its banking system.

Prime Minister Enda Kenny won European Central Bank approval to stretch the cost of bailing out Anglo Irish Bank over 40 years.

It had been due to pay it off in 10 years, straining the state’s finances and hobbling the economy.

Kenny told lawmakers: “I believe that today’s agreement is a significant milestone. It closes a sad and tragic chapter in our economic and political history. We are now a poor but perhaps a wiser people from the lessons that we have learned.”

The deal follows two years of negotiations between the ECB and Irish officials.

It will cut Ireland’s borrowing requirements by 20 billion euros over the next decade, shaving one billion euros off its annual budget deficit.

That puts Dublin on track to end its reliance on European Union and International Monetary Fund
loans by the end of this year.

The deal took so long to work our because the ECB was worried that easing the crunch in debt repayments could set a precedent for other countries, such as Spain, which are also dealing with large bank debts.

However, European leaders were also keen to offer a success story from the region’s debt crisis to encourage both voters and potential investors.

Replacing promissory notes, or IOUs, given by Ireland to the former Anglo Irish Bank with longer-term government bonds will help Dublin emerge from the policy strictures of an EU-IMF bailout package on schedule this year.